Feature: How Nokia lost control of its own destiny

updated 07:31 am EDT, Tue October 16, 2012

by MacNN Staff

Nokia, a victim of its own success and poor choices

How does a company that was the leading mobile handset maker in the world for 15 years, and $11 Billion in cash just five years ago become an also ran? That's a question many at Nokia must have asked themselves as they watched it lose control of its own destiny and instead become highly reliant on a strategic alliance with Microsoft to survive. A former manager with the Finnish phone giant spoke with Electronista about the company's unraveling over the past five years, which he traced to Nokia's decision to pursue both Symbian OS and Maemo OS as two distinct development initiatives.

If the idea of developing two parallel mobile operating systems parallel under the one roof strikes you as odd, you're not alone; so did many of Nokia's employees. With the two projects being run separately, unhealthy competition was a near inevitability. Had the teams had worked in tandem, things might have been quite different for Nokia. However, it was against a dysfunctional context that Apple launched its game changing iPhone in 2007. Maemo (the forerunner to MeeGo) was already in development at this time, but the rapidly aging Symbian OS remained the flagship OS until as recently as late 2011, when Nokia finally launched its first Windows Phone 7 handset, the N9-inspired Lumia 800.

If Nokia was to develop a competitive operating system in-house, our source said, the two teams needed to work collaboratively. However, this did not happen for several reasons. Symbian devices were still selling relatively well, even after the launch of the iPhone and Android's early gains. Symbian also had a solid ecosystem that was well supported by developers. This, combined with its brand recognition and reputation, masked underlying problems with its OS. Very quickly, the mobile app revolution saw developers rapidly switch to, or prioritize, iOS and Android while Symbian was sidelined. By comparison, Symbian was outdated, slow, was clunky to use and rapidly fell out of favor with consumers at the profitable, high-end smartphone segment.

Internally, both of Nokia's major OS projects are also said to have suffered from the over use of subcontractors based in different parts of the world, who also spoke different languages, compounding problems. This further slowed down the development pathway as Nokia's software engineers were then left with difficult debugging issues in order to get their respective operating systems to work properly. Further, the company developed multiple UI concepts that also competed for attention internally (some for Symbian, some for Maemo), with the vaunted Swipe "buttonless" UI finally making an appearance on the ill-fated N9 in mid-2011.

Instead of helping to bridge the gap between its two operating systems, Nokia's 2008 acquisition of the software development platform Qt only compounded existing problems. "Hundreds of people" at Nokia worked on developing separate tools for the two operating systems. It was apparent to those working on the projects that this "made no sense at all." In early 2010, Nokia announced that it was going to partner with Intel and merge the Maemo OS with Intel's Mobilin OS to create MeeGO OS. Nokia was trying to hedge its bets, but its strategy was poor, creating a greater divide between the MeeGo team and the Symbian team, which felt threatened by the move.

Ultimately though, the only product of the MeeGo project was the N9. However, it was launched following Nokia CEO Stephen Elop's famous "burning platform" memo. In it, Elop outlined his plan to adopt Microsoft's Windows Phone OS, abandoning any further development of Symbian and MeeGo. As innovative and intuitive as the MeeGo OS was, it was released to a market that questioned why it was being released at all under the circumstances. According to Electronista's source, had senior Nokia exec, Anssi Vanjoki, been appointed CEO of Nokia instead of Stephen Elop, he would have pursued MeeGo as Nokia's flagship OS moving forward. However, despite doing much good for Nokia over the years, Vanjoki also held some responsibility for the situation that developed with the Symbian and MeeGo teams, according to our source.

Our source also said that the only way that MeeGo could have led Nokia's mobile efforts into the 21st Century was if the Symbian and MeeGo initiatives had been coordinated as joint projects. In retrospect, our source believes that Nokia needed to graft the contemporary UI elements from MeeGo onto Symbian, and transition to what would have been the all-new MeeGo OS. MeeGo possessed the architectural underpinnings and scalability needed to compete with iOS and Android.

A MeeGo-based tablet, internally considered as the 'big brother' to the N9, was another casualty of the switch to the Windows Phone OS. Our source has used a prototype of the device, saying that it was based on the same design aesthetic as the N9. The source also said it was highly likely that a modified version of this stillborn tablet will be reemerge as Nokia's first Windows 8 tablet. Whether this would be a full Windows 8 tablet on x86, or a Windows RT tablet on ARM remains uncertain. Design-wise, though, it will likely bring a literal splash of color to the largely black-and-white tablet scene when it launches.

In the end, Electronista's source contends that the decision to forge an alliance with Microsoft was the only viable option to try rescue the company, although this was not a view held by all former Nokia management. Microsoft has the money and marketing muscle to help drive the Windows Phone operating system forward as a viable third player in the smartphone space. However, it is possible that Nokia may have not been fully aware that Microsoft would not support Windows 7 handsets with the new Windows 8 operating system, landing yet another blow on Nokia's comeback bid.

Stephen Elop recently conceded that Nokia's Windows Phone 7 handsets have not sold as well as the company would have liked. Although it was making some progress following its entry into the U.S. market with the Lumia 900 in the first quarter of 2012, it would have been a bitter pill to swallow when it became clear that Windows Phone 8 is not backwards compatible with Windows Phone 7 handsets. However, at the same time, Windows Phone 7 was being hampered in the smartphone spec arms race as it did not support multi-core processors; the switch to Windows Phone 8 will address this perceived shortcoming with support for up to 64 cores.

Although Electronista's source supported Elop's decision to switch to Microsoft, the source did not support Elop's decision to drop its Meltemi OS development operations as well. The Meltemi OS was Nokia's equivalent to Samsung's Bada OS, which was to be aimed at its low-end 'feature phones.' Most of Nokia's volume selling phones are feature phones that carry the company's signature build quality, but are priced to sell. An updated OS would for its low-end customers would have helped it optimize the OS to lower power and cheaper processors. However, the company announced in July, that it was scrapping the Meltemi OS too, in favor of an all Windows Phone OS line-up.

The revelations here offer an insight into how things felt apart for Nokia over the past five years, while providing a hint as to how things might have been different. Unlike RIM, which has simply been too slow to respond to with a full multi-touch capable mobile OS, Nokia was making a serious effort to respond to the radically altered smartphone landscape with authentic multi-touch devices and a modern multi-touch OS in MeeGo. Nokia remains the number two handset maker in the world (it lost the top spot to Samsung), but its high-end smartphone sales have fallen off a cliff and it is hemorrhaging cash.

Nokia's new Windows Phone 8 Lumia 920 and Lumia 820 smartphones are set for release in November and carry the high hopes of the company with them. Nokia shareholders will be keeping a close eye on the company's progress. Windows Phone 8 continues with Microsoft's 'Modern UI' theme, but Nokia will be banking on Microsoft's marketing power to stakeout a substantial market share, through by also developing a robust app and content ecosystem. For better or worse, Nokia's future depends on it.

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